Need Help Making Sense of Used Car Prices


MikeS21
08-27-2014, 02:13 PM
Wife and I are looking at buying a used Chrysler Town and Country van. We are focusing on a 2011-2013 model (NO Trade-In). The dealers in our area have set prices that are fairly similar, but there is always the negotiating game (which I detest).

I have gotten a slew of advice ranging from offering 30% less than asking price and settling for 20% less, to offering 10% less than asking price and feel lucky if you can get it for 5% off. All of them say "Know what the van is worth," and they refer me to either KBB or NADA or Edmunds or some other online site that gives car values. That is where my problem starts ...

EXAMPLE: A 2011 Town and Country (Touring but not LWB) with 35,000 miles gives the following figures out of KBB:
-Fair Market Range: $17,675 - $21,500
-Fair Purchase Price: $19,590 (NADA says this vehicle would retail for $19,225)

I am finding 95% of the vans are right at the Fair Purchase Price - plus or minus about $800. Every dealer smiles and politely points out this fact when you ask them if they will take less. Are folks really paying that, or are the dealers coming down 5% - 15%?

However, on that same vehicle, KBB lists the following information:
-Trade-In Range: $14,615 - $15,533
-Trade-IN Value: $15,075* (NADA lists the average condition trade-in price as $15,250)
* Based on "Good Condition". "Fair Condition" is $13,425 for a Trade-In Value.


Here are my questions:

1)Based on my findings, what is the "value" of a 2011 Town and Country with 35,000 miles? Is it based on the retail or the trade-in or somewhere in between?

2) Does the dealer actually getting the van in trade in for $13,500 - $15,000 (his cost), and then asking (and getting) $19,500 when he sells it? Can I estimate the dealer cost fairly accurately with this information?

3) I have a feeling most of these vans are coming from auction, not through a trade-in. What if dealer got the van at auction and not in a trade-in? How much is his cost differ?

FINALLY: Let's say the dealer is asking $19,295 for this van (reminding me that he is already asking BELOW Fair Purchase Price of $19,590). How much would you offer, and what would you settle for? My goal is to get out the door (tax/title/everything) for absolutely no more than $18,000 - $18,300.

The strange thing about the whole deal is that I can drive an hour north or south of our tri-county area, and find this SAME vehicle on a dealer lot, with an asking price BELOW $17,500. Very tempted to make the drive.

Need some help!

drdisque
09-02-2014, 07:21 PM
The dealers are paying a little more than the trade in price. They are often buying the vehicles at auction. The auction company takes a commission and the seller often makes a little profit on the vehicle if it came in off trade (a lot of auctioned vehicles come off lease so their profit is the auction sale price+money collected from the lessee-cost of vehicle from the manufacturer.

In general, more and more dealers are pricing their cars more aggressively with regards to listed price and are conversely less willing to negotiate. Generally now the only time they will negotiate is if the car has been on their lot for a long time (4 months or more).

Keep in mind that listed trade in costs are low because it costs the dealer quite a bit of money to stay in business and that they also spend several hundred, or possibly even $1000 prepping the vehicle for sale.

I would drive to where the vehicles are cheaper. It's definitely worth a few hours of your time to save $1000-$2000.

Dave B.
09-11-2014, 02:32 AM
MikeS21

I'll do my best to answer your questions, but you may not be happy with my replies because, unlike new cars, there are no 'fixed values' in the used car world. I've been in and around the new/used car market for the last 40+ years, so I've seen most of what goes on.

Wife and I are looking at buying a used Chrysler Town and Country van. We are focusing on a 2011-2013 model (NO Trade-In). The dealers in our area have set prices that are fairly similar, but there is always the negotiating game (which I detest).

I hate the negotiations, too, but it's part of the game. The first thing to understand is that, unless there is an advertised price on the vehicle, there is no guarantee that the price you're quoted by a salesperson is the same price that the last customer or the next will be quoted. The salespeople are working on commission. Their job is to evaluate potential customers and sell the vehicle for the absolute top dollar they can squeeze out of you. There's typically a base price (what the vehicle is "put in" for). This number is the dealer's cost plus "clean-up" (tires, mechanical repairs or needed body work, etc.) plus the minimum profit they're willing to accept. When the car is sold, the salesperson is paid a percentage of the difference between that base price and the sale price.

I have gotten a slew of advice ranging from offering 30% less than asking price and settling for 20% less, to offering 10% less than asking price and feel lucky if you can get it for 5% off. All of them say "Know what the van is worth," and they refer me to either KBB or NADA or Edmunds or some other online site that gives car values.

Since no one outside "the office" knows what the dealer paid for the vehicle or exactly how much he/she has "marked it up", there's no other answer than the one above. The lowest selling price depends on how badly the dealer wants to "move" the vehicle in question. I don't have time to type out all the reasons, but most dealers don't want used vehicles on their lots for more than about three months. If a vehicle sits around too long, they will send it to the auction. If you're lucky enough to catch one that fits your needs when it's in that window, the dealer will probably cut a sweet deal on it.

Here are my questions:

1)Based on my findings, what is "value" of a 2011 Town and Country with 35,000 miles? Is it based on the retail or the trade-in or somewhere in between?

As said above, there's no exact answer to this question.

2) Does the dealer actually getting the van in trade in for $13,500 - $15,000 (his cost), and then asking (and getting) $19,500 when he sells it? Can I estimate the dealer cost fairly accurately with this information?

You can't accurately estimate dealer cost on a used car. The "asking" price is always quite a bit higher than what the dealer will sell the vehicle for in a non-trade deal. The dealer will set the asking price at what he/she thinks the local market will bear without scaring off customers. Trade-ins are what really complicate the used car market. Everyone expects to get top-dollar for their current car, even if it needs repairs. The dealers use the extra mark-up to "show" the customer a high trade-in. If you were looking at a new van, this would be a relatively fixed amount for each dealer, but that's not the case with used vehicles - it's different for each one.

3) I have a feeling most of these vans are coming from auction, not through a trade-in. What if dealer got the van at auction and not in a trade-in? How much is his cost differ?

Most smart "smaller" dealers DO get a high percentage of their used cars from auctions. Large dealers only want used vehicles that can command high re-sale profits. Lease companies want to move their incoming used vehicles as quickly as possible. So, both use auctions to move their unwanted stock. (Yeah, this is also complicated...) Although not true in EVERY case, vehicles coming in from auction typically cost the dealer more than trade-ins.

FINALLY: Let's say the dealer is asking $19,295 for this van (reminding me that he is already asking BELOW Fair Purchase Price of $19,590). How much would you offer, and what would you settle for? My goal is to get out the door (tax/title/everything) for absolutely no more than $18,000 - $18,300. The strange thing about the whole deal is that I can drive an hour north or south of our tri-county area, and find this SAME vehicle on a dealer lot, with an asking price BELOW $17,500. Very tempted to make the drive.


Offer/settle? To me, it would depend on how badly I wanted that particular vehicle. If it's EXACTLY what I need and in perfect shape, I'd be willing to pay more. Some advice: When it comes to making the deal, make the dealer do the negotiating. First, don't act too interested. I'd say that 15% under the asking price is a good starting point for an offer, as long as it's within the KBB or other guidelines. Find out everything that's important to you about the vehicle, then tell the salesperson that it's "Not exactly what I'm looking for.." and make a low offer ("I might be willing to pay $xx,xxx"). Give the salesperson your phone number and walk out the door ("I've got two more vans I have to look at, and I have to be home by 4:00 PM"). The salesperson WILL call you. Don't take their first "new" offer. Just sound somewhat interested and say that you'll have to "think about it". They will ask you what it would take to get you to buy the vehicle today. Up your original offer a small amount. At this point, the salesperson will "have to talk to the sales manager". The price they give you on the next call will be close to what they will take for the vehicle.

Final note: Yes, it's generally worth the drive for a better deal, especially if you live near a large city. Larger dealers will typically sell on a thinner margin because they sell so many more vehicles. (You've heard: "I'll make it up on volume..." - well, that's true.) Plus, they may well be advertising the vehicles closer to cost. If that's the case, they will be less likely to come down on the selling price.

It's all a game!

Good luck with your purchase...

Dave B. (also in Ohio)

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